To Our Shareholders, Employees and Guests,

In fiscal 2003 we faced many challenges, including a difficult business environment, management transition within our organization and the difficulty of trying to surpass exceptional prior-year results. Though we made progress in several key areas, we were disappointed with our overall results and are focused on regaining our strong, positive momentum.
    Our fiscal 2003 results were not consistent with our long-term objective — and track record — of providing industry-leading shareholder value. Still, the Company was able to deliver financial improvement in a number of areas.
  • Sales increased 6.6% to $4.65 billion due primarily to continued same-restaurant sales growth at Red Lobster and Olive Garden and accelerated new restaurant growth across the Company.




  • Although fiscal 2003 net earnings of $232.3 million were a 2% decrease from prior year, diluted net earnings per share increased to $1.31 in fiscal 2003 compared with $1.30 in fiscal 2002. Since becoming a public company in fiscal 1996, we have delivered 15% compound annual growth in diluted net earnings per share.

  • Red Lobster's total sales were a record $2.43 billion, a 4.1% increase from prior year, and average sales per restaurant reached a record $3.7 million. U.S. same-restaurant sales growth for the year was 2.7%, and Red Lobster ended the year with 22 consecutive quarters of comparable restaurant sales growth. Red Lobster also built 11 new restaurants in fiscal 2003.

  • Olive Garden's total sales were a record $1.99 billion, up 6.8% from prior year, and average sales per restaurant were $3.9 million. U.S. same-restaurant sales growth for the year was 2.2%, and Olive Garden ended the year with 35 consecutive quarters of comparable restaurant sales growth. In addition, Olive Garden built 28 new restaurants in fiscal 2003.

  • Bahama Breeze continued to receive acclaim from both guests and restaurant critics for the quality of its dining experience. The company opened five restaurants in fiscal 2003, bringing the total number of restaurants in operation to 34. Sales continued to soften from the prior year's levels, although Bahama Breeze's sales remain at the high end of the casual dining industry — averaging over $4 million per restaurant as a dinner-only business.